How to Build Credit Fast The Right Way

If you want to know how to build credit, you’ll need to get a copy of your credit report. All three major credit bureaus will provide you with a free credit report each year. The credit report will include your personal information, account information, public records, and any hard inquiry made using your social security number.

Reviewing your credit report will give you a better understanding of where to begin to build credit. You may need to work on cleaning up negative items on your credit report. Maybe you have a positive credit history with all your accounts but have a high credit utilization that has negatively impacted your score.

A couple of the best strategies to build your credit are through making sure you have your utilities counted by the bureaus, the utilization of microloans, and secured credit card options. But, you MUST make sure when getting a secured credit card that they report to ALL three bureaus.

If you don’t have a credit history, you may be considered credit invisible. One in ten adults is credit invisible, meaning they don’t have an established credit history that gives them a credit score. If you are credit invisible, it is difficult to get approval for a credit account or loan. 

Building Credit with a Cosigner

If you have bad credit or no credit, you can build credit by getting a credit card or loan with a cosigner with good credit. A cosigner gives the lender security that the debt will be paid if you fail to make payments, so creditors and lenders will be more likely to approve you for a loan when you have a cosigner with good credit.

You should consider building credit with a cosigner if you are credit invisible, are less than 21 years old, or need help each month with the monthly payment.

A cosigner will help you build credit as long as the credit account remains in good standing, meaning that you make the minimum payment each month and make it on time. Failing to make the minimum payment on time each month can hurt your credit instead of building it.

The cosigner you choose should be a reliable family member or friend responsible for making payments on the account if you cannot.

When to Use a Cosigner for the Credit Building Process

You can use a cosigner for various types of credit accounts. You can add a cosigner to a credit card application, car loan, personal loan, or other lines of credit.

Creditors and lenders will regularly receive applications from borrowers who are 18 and have no credit history. The best way to establish credit at 18 is to add a cosigner to your credit card or loan account, which will help you establish a credit history and build credit.

You can also use a cosigner when your credit has negative items, like late payments, missed payments, or collections. A low credit score or no credit score at all can both prevent you from being approved for a loan or credit card. You can use a cosigner to help you repair your credit and build it back.

Building Credit with Credit Cards

There are different credit card options you can choose when you are beginning to build your credit history. Student credit cards and secure credit cards are best for beginners who are just starting to build their credit. Store credit cards are another option that both beginners and those with bad credit can use to build their credit.

Student Credit Cards

If you are a college student who is 18 years or older, you may be eligible to apply for a student credit card. Student credit cards are for college students who likely have very little or no credit. Student credit cards often have low-interest rates so that students can make their monthly payments. Some student credit cards may also have reward programs in which you can enroll. These reward programs may give you incentives when you buy gas or spend money at certain stores.

Secure Credit Cards for Building Your Credit

Building credit is difficult when you have money to pay a credit card bill, but no creditor will approve you for one. Secure credit cards are for people who need to build credit. When you apply for a secure credit card, you will be required to deposit an amount of money as collateral.

Secure credit card companies may also charge high-interest rates or an annual fee. When used the right way, a secure credit card helps build credit within just a few months. Ensure that you make your monthly payments on time and don’t charge more than you can pay off each month.

The goal here would be to use it on small monthly necessities and pay it off in full every month. This way the interest rate is not a factor.

Increasing Credit Scores with Store Credit Cards

Many store credit cards offer approval to borrowers with low or no credit. Like secured credit cards, store credit cards can help you build credit if used responsibly. We recommend getting a store credit card at a retailer that you will shop at frequently to establish revolving debt.

Again, this is the time to only buy things that you have to get anyway. You want to avoid getting stuff that is unnecessary, it is better to just not use it then.

Building Credit as an Authorized User

You can also build credit by becoming an authorized user on another person’s credit card. When you or the account holder uses the credit card linked to the account, both people’s credit reports reflect the account in their credit history, helping build your credit.

This arrangement may not be enough for you to establish good credit if you don’t have an established credit history; however, being an authorized user on another person’s credit card can help you improve a bad credit score.

Other Ways to Build Credit Without a Credit Card

Credit cards aren’t the only method you can choose to build your credit. There are a variety of loans you can apply for that can help build your credit. We also recommend enrolling in various credit-boosting programs like Experian Boost and UltraFICO.

Take Out a Small Micro Installment Loan to Build Credit

There are various loans you can apply for that, if approved, will help you build your credit. Credit builder loans have the highest approval rating for people who have no credit history. Credit builder loans have short-term limits and small loan amounts. They are typically required to be paid in full between 6 and 12 months and provide a total loan amount between $1,000 and $2,000. There are also options such as tradelines, but you have to learn more about how tradelines work.

To get a credit builder loan, you should contact a finance company or bank and fill out an application. These types of options have gotten a lot easier in recent years. One of the best companies out there for this is Self.inc and comes highly recommended.

Student loans are also a great option for building your credit while also financing your school tuition. Student loans have high approval rates and longer-term limits to allow you to pay them back over ten years.

Many car dealerships offer financing in-house, which allows you to add a car loan to your credit history. A car loan will have shorter-term limits and possibly higher interest rates than student loans or credit builder loans; however, a car loan will show up on your credit report as soon as the following month and will help you begin to build credit quickly.

Enroll in Credit Boosting Programs to Build Your Credit Fast

Wouldn’t it be nice to get credit for paying your bills? With credit boosting programs, now you can.

Credit boosting programs will help you build your credit by giving you credit for paying monthly bills like utilities, cell phones, and popular streaming services. You will need to link the credit boosting program to your bank account. When you make a payment to a utility, phone company, or streaming service, the credit boosting program will give you credit.

Experian Boost is one of the leaders in this space. This is an easy way to build a bit of credit or boost your credit score fast.

Another option is if you rent an apartment or have a landlord, you can ask your landlord or property management company to report your rent payments to the credit bureaus each month. Some property management companies give you the option to opt-in to having your rent payments reported to the credit bureaus each month.

How to Quickly Build Credit

Building credit isn’t an overnight process. It will take months of consistent work. Knowing how your credit score is calculated will help you quickly build positive credit.

Your credit score is made up of five primary factors: payment history, credit utilization rate, credit age, credit portfolio, and inquiries.

Payment History (35%)

Payment history makes up 35% of your credit score, so you must always make your payments on time. Missing just one payment or paying one payment 30 days late can significantly hurt your credit score. When building your credit, make sure you always make your payment on time and never make a payment late.

Credit Utilization Rate (30%)

Credit bureaus look at how much you owe on each credit account and divide it by the total credit limit of each account, giving you a credit utilization rate. It makes up 30% of your credit score. Credit utilization rate is the second most important factor that credit bureaus use to calculate your credit score.

If you have a credit utilization rate of more than 30%, it will hurt your score and make it more difficult for you to build credit. Creditors prefer a credit utilization rate of 30% or less because it shows that you are a responsible borrower who doesn’t run up a high balance each month. Ideally, creditors look for a credit utilization rate of 10% or less; however, a credit utilization rate of at least 30% or less is acceptable to maintain a good credit score.

Credit History Age (15%)

The third most important factor that credit bureaus consider when calculating your credit score is the age of your credit history. A young credit history hurts your credit score only because it doesn’t give creditors and lenders a good understanding of your credit reputation as a mature credit history.

Credit Portfolio (10%)

Your credit portfolio is a mixture of all your credit and loan accounts. A diverse credit portfolio will help you build your credit because it shows lenders and creditors that you can successfully manage a variety of accounts. Your credit portfolio only makes up 10% of your credit score, but by having a mixture of credit and loan accounts, you can help build your credit score.

Inquiries (10%)

When you apply for a new loan or credit account, the creditor will run your credit to review your credit score to see if you are eligible for approval. This verification is called a hard inquiry, and it will stay on your credit report for up to two years. Many creditors understand that hard inquiries occur when you shop around for the best rates, so they often won’t hold hard inquiries against you. Inquiries only make up 10% of your credit score, making them one of the least impactful aspects of your credit score.

Quick Tips for Building Your Credit

Before you go, we want to share a few quick tips you can follow to build and improve your credit. Following these tips will help you increase your credit score and maintain it.

Tip #1: Pay Off Credit Card Balances

Paying off credit cards will impact two aspects of your credit score: your credit utilization and your credit payment history. Not only will you be making the payment on time, but you will be paying off the credit card balance, which will reduce your credit utilization rate and increase your credit score.

Tip #2: Remove Negative Items

If your credit score is poor because of negative items and you need to build back your credit quickly, you can request to have the negative item removed with a pay for delete letter or a goodwill letter.

Tip #3: Keep Accounts Open

Open accounts will contribute to your credit age, so it’s important to keep old accounts open even if the account balance is paid in full and you no longer plan to use the credit card.

Tip #4: Minimize Hard Inquiries

Try to limit applying for credit cards or loans so that your credit score isn’t hit with too many hard inquiries at one time. While hard inquiries only make up 10% of your credit score, they will stay on your credit report for up to two years and may signal lenders or creditors that you are a risky borrower who frequently applies for loans or credit card accounts.

Tip #5: Get Enrolled into a Credit Boosting Program to Build Credit

If you are looking for some quick wins, a program like Experian Boost can be very positive in the short term for a quick boost.

Tip #6: Explore Easy Installmant Loan Options to Build Credit

Building credit is a long game. So it is important to stack the cards in your favor as best you can. Luckily, in this day and age, you can do a mix of short-term and long-term credit-building plays. An easy program like Self.Inc will do just that.

Stay smart and consistent and credit building will pay off in a big way!